Correlation Between Sp 500 and Sentinel Small
Can any of the company-specific risk be diversified away by investing in both Sp 500 and Sentinel Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sp 500 and Sentinel Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Index and Sentinel Small Pany, you can compare the effects of market volatilities on Sp 500 and Sentinel Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sp 500 with a short position of Sentinel Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Sentinel Small.
Diversification Opportunities for Sp 500 and Sentinel Small
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SPFIX and Sentinel is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and Sentinel Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Small Pany and Sp 500 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sp 500 Index are associated (or correlated) with Sentinel Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Small Pany has no effect on the direction of Sp 500 i.e., Sp 500 and Sentinel Small go up and down completely randomly.
Pair Corralation between Sp 500 and Sentinel Small
Assuming the 90 days horizon Sp 500 is expected to generate 1.14 times less return on investment than Sentinel Small. But when comparing it to its historical volatility, Sp 500 Index is 1.05 times less risky than Sentinel Small. It trades about 0.06 of its potential returns per unit of risk. Sentinel Small Pany is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 480.00 in Sentinel Small Pany on September 12, 2024 and sell it today you would earn a total of 187.00 from holding Sentinel Small Pany or generate 38.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 Index vs. Sentinel Small Pany
Performance |
| Timeline |
| Sp 500 Index |
| Sentinel Small Pany |
Sp 500 and Sentinel Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Sentinel Small
The main advantage of trading using opposite Sp 500 and Sentinel Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Sentinel Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sentinel Small will offset losses from the drop in Sentinel Small's long position.| Sp 500 vs. Sp Midcap Index | Sp 500 vs. Sp Smallcap Index | Sp 500 vs. Deutsche Equity 500 | Sp 500 vs. Dreyfus Institutional Sp |
| Sentinel Small vs. Sp Midcap Index | Sentinel Small vs. Sp 500 Index | Sentinel Small vs. Nasdaq 100 Index Fund | Sentinel Small vs. Deutsche Sp 500 |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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